Ahead of the monthly derivatives expiry, the Indian equities once again consolidated as it traded in a range and ended positive but with negligible gains. Markets saw a positive start to the day; it got stronger in the evening trade while continuing to post fresh lifetime high levels. It was in the middle of the day that the markets saw a sudden profit-taking from the higher levels. NIFTY saw recovery once again in the afternoon trade but once again pared its recovered gains to trade on a flat note. In the end, the headline index closed with negligible gain of 10.05 points (+0.06%).
Thursday will see both the routine weekly options expiry as well as the monthly expiry of the current month derivative series. The strikes of 16500 and 16600 have seen a good number of unwinding of Call OI. At the same time, 16600 has seen an addition in PUT OI. This means that unless there is a major tactical shift, the markets are not expected to violate 16500-16600 levels in event of any corrective move. On the other side, the highest Call OI is at 16700; unless this shifts, the upside moves also will stay capped.
Volatility increased a bit; INDIAVIX rose by 2.35% to 13.4975. Thursday is likely to see the levels of 16700 and 16765 acting as immediate resistance points. The supports come in at 16580 and 16525 levels.
The Relative Strength Index (RSI) on the daily chart is 71.26. It remains neutral and does not show any divergence against the price. RSI also remains mildly in the overbought zone. The daily MACD is bullish and remains above its signal line. A Spinning Top occurred on the charts. This type of candle emerging near the high point may cause the markets to consolidate a bit. It also shows a tentative approach and lack of directional consensus among the market participants.
Overall, the analysis for Thursday remains more or less on similar lines. The markets are near their lifetime high point; moving past the 16700 marks will be crucial for another meaningful up move. However, so long as the markets are below the 16700 levels, there are higher chances of it consolidating in a defined range. It is recommended to continue approaching the markets with a selective approach. It would be prudent to stick with large caps that are showing improvement in their relative strength against the broader markets. A cautiously positive outlook is advised for the day.
This was first published by The Economic Times.
Milan Vaishnav, CMT, MSTA
Consulting Technical Analyst
Member: (CMT Association, USA | CSTA, Canada | STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)
